China boosts spending for virus-hit economy, takes up HK law

A Chinese paramilitary policeman stands guard near Tiananmen Square before the opening session of China's National People's Congress (NPC) at the Great Hall of the People in Beijing, Friday, May 22, 2020. (AP Photo/Ng Han Guan, Pool)

BEIJING – China’s No. 2 leader on Friday promised higher spending to revive its pandemic-stricken economy and curb surging job losses but avoided launching a massive stimulus on the scale of the United States or Japan.

Premier Li Keqiang told lawmakers Beijing would set no economic growth target, usually a closely watched feature of government plans, in order to focus on fighting the outbreak. The virus battle “has not yet come to an end,” Li warned.

Also Friday, legislators took up a proposed national security law for Hong Kong that activists complain might be used to suppress political activity. The Trump administration has warned it might withdraw the former British colony's preferential trade status if the “high degree of autonomy" promised by the mainland is eroded.

The coronavirus pandemic that prompted China to isolate cities with a total population of 60 million people added to strains for the ruling Communist Party that include anti-government protests in Hong Kong and a tariff war with Washington.

China has reported 83,000 virus cases and 4,634 deaths from the virus. It was the first country to shut down factories, shops and travel to fight the pandemic and the first to reopen in March but it is still struggling to revive activity.

Private sector analysts say as much as 30% of the urban workforce, or as many as 130 million people, have lost their jobs at least temporarily. They say as many as 25 million jobs might be lost for good this year.

Beijing will give local governments 2 trillion yuan ($280 billion) to spend on meeting goals including creating 9 million new jobs, Li said. That is in line with expectations for higher spending but a fraction of the $1 trillion-plus stimulus packages launched or discussed by the United States, Japan and Europe.

“These are extraordinary measures for an unusual time,” the premier said in the nationally televised speech.

The world’s second-largest economy contracted by 6.8% over a year earlier in the three months ending in March after factories, offices, travel and other businesses were shut down to fight the virus. Forecasters expect little to no growth this year, down from 2019’s 6.1%, already a multi-decade low.

The big deficit “indicates significant policy support for the domestic recovery,” Louis Kuijs of Oxford Economics said in a report.

However, Beijing is reluctant to launch a stimulus that would add to already high Chinese debt and strains on the financial system, Kuijs said.

Li also promised to work with Washington to carry out the truce signed in January in their fight over Beijing’s technology ambitions and trade surplus. The premier gave no details, but President Donald Trump has threatened to back out of the deal if China fails to buy more American exports.

Strains with Washington have been aggravated by Trump’s accusations that Beijing is to blame for the virus’s global spread.

Also Friday, the government announced the military budget, the world's second-biggest after the United States, will rise 6.6% to 1.3 trillion yuan ($178 billion). The military budget excludes some large items including acquisitions of major weapons systems.

This year's annual session of the ceremonial National People’s Congress is being held under intensive anti-disease controls. Officials are holding news conferences by video instead of meeting reporters face to face. Reporters are required to undergo laboratory tests for the virus before being allowed into the press center.

The proposed Hong Kong security law will authorize the NPC to change the territory's Basic Law, or mini-constitution, to require its government to “prevent, stop and punish acts endangering national security,” according to Wang Chen, a deputy chairman of the Congress's Standing Committee.

Friday’s move appears to have been prompted by anti-government protests in Hong Kong that began in June over a proposed extradition law and have expanded to cover other grievances and demands for more democracy. A similar measure was withdrawn from Hong Kong’s legislature in 2003 following massive public protests.

Wang said Beijing had to take action because activities in Hong Kong “threatened national security,” according to the official Xinhua News Agency. Wang blamed the territory's failure to enact such measures on “sabotage and obstruction” by “external hostile forces” and people “trying to sow trouble in Hong Kong."

The Trump administration is delaying submission to Congress of a report on Hong Kong’s status to see whether the NPC takes steps that “further undermine” its autonomy, said a spokesman for the U.S. Embassy in Beijing.

“Any effort to impose national security legislation that does not reflect the will of the people of Hong Kong would be highly destabilizing, and would be met with strong condemnation from the United States and the international community,” the spokesman, Frank Whitaker, said in an email.

Amnesty International complained in a statement that such “repressive security regulations” are a “threat to the rule of law in Hong Kong” and an “ominous moment for human rights in the city.”

Hong Kong’s main stock market index tumbled 5.6% on the news. Other Asian markets also declined due to concern about U.S.-Chinese tension but none by such a wide margin.

Li urged officials to make progress in areas including employment, trade, attracting foreign investment, meeting the public’s basic living needs and ensuring the stability of industrial supply chains.

Ensuring economic growth is “of crucial significance” even though Beijing set no official target, Li said. Pressure on employment has “risen significantly," he said.

Automakers and other manufacturers say production has rebounded almost to normal levels, but consumer spending, the main engine of economic growth, is weak amid widespread worries about potential job losses.

Forecasters say China is likely to face a “W-shaped recovery” with a second downturn and millions of politically volatile job losses later in the year due to weak U.S. and European demand for Chinese exports.

The ruling party hopes to achieve longer-term goals including eliminating rural poverty despite virus-related disruptions of efforts to double economic output and incomes from 2010 levels by this year.

“We will give priority to stabilizing employment and ensuring people’s livelihood and resolutely win the battle to overcome poverty," the premier said.

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.